By TraderVox.com
Tradervox (Dublin) – Some financial analysts have indicated that the SNB may push its ante from the current 1.2000 to 1.2500. According to the source of these news reports, traders should not underestimate the SNB commitment to keep the euro-Swiss cross above the 1.2000. At 1.2000, the cross is highly undervalued according to some bank officials in the country.
There are those people who are expecting the cross to trade at 1.3500-1.4000 range adding to sentiments that the SNB may actually revise its cap. WSJ carried an article by Jim O’Neill suggesting that these concerns might actually materialize. These comments saw the cross rally marginally during on Wednesday, and after the SNB Interim Chairman indicated that the SNB is ready to make unlimited foreign currency purchases to protect the cross’ cap.
According to Deutsche Bank AG, the Swiss National Bank’s defense for the cap has been passive so far and this may encourage traders to end bets the currency will weaken. George Saravelos, who is a currency strategist in London, supported these comments stating that the method of intervention used by the SNB is passive rather than active. However, the comments by Jim O’Neil points to the SNB’s commitment to this cap and even suggests and upward review of the cap dispelling some concerns about the SNB commitment to defend the cap.
During the European Session, the franc exchanged at 1.20261 per euro. Concerns were raised about the reliability of this cap when the cross traded at 1.19995 on April 5. Data show that the cross has traded between 1.21989 and 1.19930 this year but has gone as up as 1.24736 in since the cap was introduced. This happened in October 19.
While the SNB Interim Chairman has indicated the willingness to do everything possible to protect the cap, traders are expected to keep testing this limit hence the view that the SNB might increase the cap to 1.25. Traders are keeping a close eye on SNB actions as the cross trades close to the cap.
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